Ion Exchange (India) Limited vs Paramount Limited And Ors.
2002 Latest Caselaw 1247 Bom

JUDGMENT

F.I. Rebello, J.

Heard forthwith.

1. Petitioners have invoked provisions of section 11 of Arbitration & Conciliation Act, 1996 and have sought reliefs that a third arbitrator be appointed considering provisions of the Arbitration Act and the agreement between the parties and pending hearing final disposal of the application to direct respondent No. 1 not to proceed further by granting injunction to that effect. A few facts may be noted which will be relevant for the purpose of resolving the controversy in issue. The arbitral Clause in the agreement between the parties reads as under:

"If any dispute arises between I.E.I. and P.P.C.I. each one shall continue the performance of its obligation without hampering the work and shall make reference to the arbitration of such disputes as cannot be mutually resolved. Both the parties will nominate/appoint one arbitrator each and an umpire to be appointed by the two arbitrators, where one party shall fail to appoint an arbitrator, after due notice, the arbitrator nominated/appointed by the other party shall act as a sole arbitrator. Such a reference shall be a submission to arbitration under the Indian Arbitration Act, 1940, as amended to date."

Disputes having arisen, the case of the petitioner is that, they invoked the arbitral Clause and appointed an arbitrator. The same was notified to the petitioners by their letter dated 13-4-2002 that they had appointed an arbitrator and petitioner were requested to select an arbitrator from their side. The petitioner did not appoint arbitrator within thirty days. The respondent therefore, wrote a letter to the petitioner and in the said letter it was set out that as per provisions of the arbitration Clause, on petitioner's failing to appoint an arbitrator, the arbitrator appointed by them will act as the sole arbitrator to arbitrate upon the disputes and differences by and between the parties and hence, now, Shri Sanat V. Pandya would be the sole arbitrator to arbitrate upon the disputes and differences by and between the parties. It is the case of the respondents that the arbitrator appointed by them had assumed jurisdiction by sending notice to the parties to participate in the arbitral proceedings, by his letter dated 25-1-2002 and further correspondence of 6-6-2002.

The petitioners in the meantime by a letter of 14-6-2002 addressed to the arbitrator appointed by the respondents, drew his attention to the fact that considering the arbitral Clause, the arbitrator could not act as the sole arbitrator, more so considering the provisions of the Arbitration & Conciliation Act, 1996. In the meantime by the letter of 17-6-2002 petitioners intimated that Justice S.K. Desai retired Judge of this Court had been appointed as their arbitrator. It is then set out that third arbitrator be appointed by the two arbitrators in consultation with each other. This fact was also brought to the notice of the respondents by fax of 17-6-2002.

2. In view of the respondent No. 2 proceeding to act as a sole arbitrator, present petition was filed invoking provisions of section 11. It is contended on behalf of the petitioners that arbitral Clause did not contain a time limit for appointing arbitrator. It is further pointed out that considering section 11 of the Arbitration & Conciliation Act, 1996, on failure by one of the parties to the agreement to appoint an arbitrator in terms of the arbitration Clause, other party had to move under section 11 for Constitution of the Arbitral Tribunal. The sole arbitrator considering provisions of the Act, 1996 could not have proceeded to assume jurisdiction and proceed with the arbitral proceedings. It is further contended that section 11 does not exclude jurisdiction of the authority under section 11 to constitute the Tribunal, even if the arbitrator appointed by the respondents assumes jurisdiction and acts as the sole arbitrator. It is contended that if such situation is allowed, it will apart from multiplicity of proceedings defeat the object of the Arbitration Act.

On the other hand, on behalf of the respondents, it is contended that arbitral Clause itself contains a provision for appointment of the sole arbitrator in the absence of the other side appointing arbitrator within a reasonable time. It is contended that reasonable time would be 30 days and consequently in terms of the Arbitral Clause, arbitrator appointed by the respondent could have acted as the sole arbitrator. Reliance has been placed on the judgment of the Apex Court in the case of Datar Switchgears Ltd. v. Tata Finance Ltd. and another, and Konkan Railway Corporation Ltd. v. Rani Construction Pvt. Ltd., .

3. The short issue that would arise in this proceeding is whether it is possible to intervene or pass any order under section 11 after the Arbitral Tribunal has assumed jurisdiction. The Apex court in Konkan Railway Corporation Ltd. v. Rani Construction Pvt. Ltd., , after considering its earlier judgments and section 11 has taken a view that the power under section 11 is purely administrative in character. The Arbitral Tribunal on the other hand would be exercising quasi judicial functions. In that circumstances, considering section 16 of the Arbitration & Conciliation Act, 1996 whether it will be possible for the authority under section 11 to issue any directions for further constitution of the Tribunal in terms of the arbitral Clause and or grant injunction. It is doubtful whether the administrative authority can grant any injunction. This is power conferred on courts and Tribunals. Apart from that considering the judgment of the Apex Court, the issue as to whether the Arbitral Tribunal appointed is Tribunal properly constituted and can decide the disputes between the parties within the jurisdiction of the Arbitral Tribunal and can be decided by the Arbitral Tribunal on the objection raised under section 16 of the Arbitration & Conciliation Act, 1996. The Apex Court noted that the language of section 16 is not limited to the width of its jurisdiction but goes to the very root of its jurisdiction and as such there would be no impediment to contest before the Arbitral Tribunal that it had been wrongly constituted. Considering that remedy is available under the Act itself to the party and considering the power conferred on the authority under section 11, to my mind, it will not be possible to pass any other order but leave it open to the petitioners to raise all objections as to jurisdiction of respondent No. 2 before respondent No. 2 who has proceeded to act as sole arbitrator.

With above observations, application disposed of.

P.A. to issue authenticated copy of this order.